IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_9942.html
   My bibliography  Save this paper

Corporate Taxation in Open Economies

Author

Listed:
  • Radek Šauer

Abstract

This paper analyzes the macroeconomic impact of corporate taxation. The analysis is conducted in a quantitative two-country model. In the first step, the paper describes the long-run effects of corporate taxation. A reduction in the corporate-income tax rate increases GDP, wages, consumption, investment, and business density. The trade balance is at the same time negatively affected. Firms headquartered in a country which lowers its corporate tax become internationally less active and instead focus more on their domestic market. In the second step, the paper presents adjustment dynamics that are induced by a corporate-tax reform. The dynamic response of the economy can substantially differ when comparing shorter and longer time horizons.

Suggested Citation

  • Radek Šauer, 2022. "Corporate Taxation in Open Economies," CESifo Working Paper Series 9942, CESifo.
    • Handle: RePEc:ces:ceswps:_9942
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp9942.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Karel Mertens & Morten O. Ravn, 2013. "The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States," American Economic Review, American Economic Association, vol. 103(4), pages 1212-1247, June.
    2. Fabio Ghironi & Marc J. Melitz, 2005. "International Trade and Macroeconomic Dynamics with Heterogeneous Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 865-915.
    3. Adam Hal Spencer, 2022. "Policy Effects of International Taxation on Firm Dynamics and Capital Structure," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(4), pages 2149-2200.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stefano Fasani & Haroon Mumtaz & Lorenza Rossi, 2023. "Monetary Policy and Firm Dynamics," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 47, pages 278-296, January.
    2. Andrea Colciago & Vivien Lewis & Branka Matyska, 2023. "Corporate taxes, productivity, and business dynamism," Working Papers 512, University of Milano-Bicocca, Department of Economics, revised May 2023.
    3. Alexandre Janiak & Paulo Santos Monteiro, 2011. "Inflation and Welfare in Long‐Run Equilibrium with Firm Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(5), pages 795-834, August.
    4. Masashige Hamano & Pierre M. Picard, 2017. "Extensive and intensive margins and exchange rate regimes," Canadian Journal of Economics, Canadian Economics Association, vol. 50(3), pages 804-837, August.
    5. Hebous, Shafik & Zimmermann, Tom, 2014. "Revisiting the Narrative Approach of Estimating Fiscal Multipliers," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100408, Verein für Socialpolitik / German Economic Association.
    6. Masashige Hamano & Francesco Pappadà, 2023. "Exchange Rate Policy and Firm Heterogeneity," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(3), pages 759-790, September.
    7. Yuko Imura, 2023. "Reassessing Trade Barriers with Global Production Networks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 77-116, December.
    8. Metiu, Norbert, 2021. "Anticipation effects of protectionist U.S. trade policies," Journal of International Economics, Elsevier, vol. 133(C).
    9. Hamano, Masashige, 2013. "The consumption-real exchange rate anomaly with extensive margins," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 26-46.
    10. Miescu, Mirela & Rossi, Raffaele, 2021. "COVID-19-induced shocks and uncertainty," European Economic Review, Elsevier, vol. 139(C).
    11. Giri, Rahul, 2012. "Local costs of distribution, international trade costs and micro evidence on the law of one price," Journal of International Economics, Elsevier, vol. 86(1), pages 82-100.
    12. Sun, Hang & Bos, Jaap W.B. & Li, Zhuo, 2017. "In the Nick of Time: A Heteroskedastic SVAR Model and Its Application to the Crude Oil Futures Market," Research Memorandum 019, Maastricht University, Graduate School of Business and Economics (GSBE).
    13. Funke, Michael & Wende, Adrian, 2022. "Modeling semiconductor export restrictions and the US-China trade conflict," BOFIT Discussion Papers 13/2022, Bank of Finland Institute for Emerging Economies (BOFIT).
    14. Antonio C. David & Can Sever, 2024. "Electoral cycles in tax reforms," Empirical Economics, Springer, vol. 67(2), pages 495-529, August.
    15. Cristiano Cantore & Filippo Ferroni & Miguel León-Ledesma, 2021. "The Missing Link: Monetary Policy and The Labor Share," Journal of the European Economic Association, European Economic Association, vol. 19(3), pages 1592-1620.
    16. Costas Meghir & Renata Narita & Jean-Marc Robin, 2015. "Wages and Informality in Developing Countries," SciencePo Working papers hal-03587627, HAL.
    17. Luboš Komárek & Kamila Koprnická & Petr Král, 2010. "Dlouhodobá reálná apreciace jako fenomén ekonomické konvergence [A Long-Term Real Appreciation as the Phenomenon of Economic Convergence]," Politická ekonomie, Prague University of Economics and Business, vol. 2010(1), pages 70-91.
    18. Gabriel J. Felbermayr & Mario Larch & Wolfgang Lechthaler, 2013. "Unemployment in an Interdependent World," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 262-301, February.
    19. James Cloyne & Òscar Jordà & Alan M. Taylor, 2020. "Decomposing the Fiscal Multiplier," Working Paper Series 2020-12, Federal Reserve Bank of San Francisco.
    20. Valerie A. Ramey, 2019. "Ten Years after the Financial Crisis: What Have We Learned from the Renaissance in Fiscal Research?," Journal of Economic Perspectives, American Economic Association, vol. 33(2), pages 89-114, Spring.

    More about this item

    Keywords

    corporate taxation; macroeconomy; heterogeneous firms; multinationals; international spillovers;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_9942. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.